Independent Contractor Status:Caught in the CrosshairsLawsuits focus on the conflicts between state labor laws and real estatelicense laws when assessing the broker-associate relationship.When Nesto Monell hung his real estate license with Jacob Realty in the Boston area in

2012, he was required to attend training,
share front-desk time with other associates, fulfill o;ce-hours duty, own a day
planner, obtain a cell phone with a 617
area code, and adhere to a dress code.

As an independent contractor, he
received a Form 1099 instead of a W- 2
from his broker and was paid on a commission basis. But Monell, along with five
colleagues at Jacob Realty and at three
other companies owned by the brokers, filed suit in late 2012, claiming the
requirements they had to meet and the
supervision they received constituted an
employee-employer relationship.

A Massachusetts Superior Court ruledin favor of the brokers last July. But thiscase and two others pending in Califor-nia have caught the attention of the realestate industry because they involvewhat many have assumed to be a settledarea of law: real estate sales associatesas independent contractors.

“Many states have adopted statutesthat explicitly provide for real estateagents to be deemed independentcontractors despite challenges like these,so these cases might be aberrational asopposed to signifying a trend of things tocome,” says Lesley Walker, NAR associ-ate counsel. “Even so, because the inde-pendent contractor status of associatesis so important to our industry, NAR islooking at this as a national issue. Howthese cases are resolved could send amessage to other jurisdictions.”A central issue in these cases is theconflict between how state employ-ment and labor laws treat independentcontractors and what brokers must do tocomply with their responsibilities underreal estate license laws.

In Monell et al v. Boston Pads, Massa-chusetts law allows brokers to treat theirsales associates as either employees orindependent contractors. (Regardlessof which path they choose, brokers mustsupervise their associates.) That setsup a conflict with state labor laws, whichdeem supervisory duties to be a factorin determining whether an independentcontractor relationship exists.

“It’s di;cult to exercise supervision
over your sales associate in accordance
with the real estate license laws and also
maintain the independent contractor
relationship in compliance with the state
labor laws,” says Walker.

In its ruling last year in favor of thebrokerage, the court said the real estatelaw prevailed for two reasons:b The real estate statute had beenamended after the independentcontractor statute came into e;ect,indicating that the legislature intendedthe real estate statute to control.b The real estate statute is the morespecific statute.